U.S. mortgage aid funds moving slowly

Money only now going to community groups

must be committed by August 27

December 31, 2009|By Jamie Smith Hopkins | jamie.smith.hopkins@baltsun.com

The foreclosure crisis might be fast-moving, but the wheels of government - not so much.

A year and a half after Congress earmarked $3.9 billion to combat the effects of empty bank-owned properties on neighborhoods, Baltimore's share of the money is just now being made available to groups that will do the actual acquiring and rehabbing. As was the case for cities and states across the nation, it took months before Baltimore got federal approval for its $5.8 million share of Neighborhood Stabilization Program funding. And it took months after that for the city to set up the framework for its effort, pick nonprofits that can handle foreclosure renovation and get contracts with those groups OK'd.

Baltimore's experience is by no means unusual. Though defaults and foreclosures continue to mount, only 26 percent of the stabilization money has been obligated by government agencies across the country.

"Many grantees are just now finalizing their game plan," said Craig Nickerson, president of the National Community Stabilization Trust, a Washington nonprofit formed to help connect those groups to the foreclosures held by banks. Just getting geared up "as the crisis keeps morphing is a daunting challenge," he added.

Paul T. Graziano, the city's housing commissioner, thinks that's particularly true of communities choosing to acquire and rehab, rather than spend money on less complicated stabilization efforts such as down payment assistance to home buyers getting foreclosures.

"It's a new program for everybody. Everybody's kind of experimenting with it," he said. "I think we'll see a surge of activity here and nationally over the next several months."

The federal money comes with what the U.S. Department of Housing and Urban Development calls an ambitious timetable: All money must be obligated no later than 18 months after it was granted to government agencies. For Baltimore, that's an Aug. 27 deadline. Obligated isn't the same as spent, but it will require that the rehabbing groups at least be under contract to buy all the properties they intend to fix up.

Steve Janes, assistant commissioner of research at Baltimore's housing agency, said that shouldn't be a problem. "Now that we're finally getting out of the gate, we'll get out pretty fast," he said.

Some communities that were faster out of the gate have found it much more difficult to buy foreclosures than they anticipated, in part because they're competing with real estate investors for deals. But St. Ambrose Housing Aid Center, which is getting close to $1.7 million in neighborhood-stabilization money, said investor activity seems to have slowed locally.

"People are discovering it's not easy," said Lisa R. Evans, deputy director of St. Ambrose, a Baltimore nonprofit that has been rehabbing foreclosures for years.

There's no shortage of bank-owned properties in Baltimore, she added. And that's the really big stabilization challenge: The federal funding can't do more than melt the tip of the foreclosure-crisis iceberg.

Janes said the city's share should allow 80 units to be acquired and renovated, which includes the city's expectation that any homes rehabbed for resale will put some money back into the pot for more rehabbing work once buyers are found. But more than 2,700 Baltimore properties were sold at foreclosure auctions in 2009, according to the Circuit Court for Baltimore City.

On top of that are any homes that lenders took back at auction last year and haven't sold yet, and the hundreds more that are earlier in the foreclosure process. Lenders started foreclosure proceedings on about 1,800 properties during the summer, nearly two-and-a-half times as many as the previous summer.

And this is in a city that hasn't been hit as keenly as communities in big housing-bust states - California, Florida and Nevada in particular - or economically distressed parts of the upper Midwest. In a single city in a six-month period - Chicago in the first half of 2008 - the auction value of homes being taken back by lenders was nearly $1 billion, according to an analysis by the Chicago-based Woodstock Institute. Chicago's share of stabilization dollars: $55 million.

"We're doing what we can with the money we do have," said Molly Sullivan, a spokeswoman for Chicago's Department of Community Development. The city has spent $1.7 million acquiring 88 units and has its eye on hundreds more.

Baltimore's strategy is to focus its stabilization money on a handful of neighborhoods with a "reasonably viable housing market" but a lot of foreclosures, places that run the risk of rapid deterioration. Habitat for Humanity of the Chesapeake, which is getting about $1 million, expects to work in small parts of eastern and southern Baltimore. St. Ambrose will rehab homes in neighborhoods it has been working in for years, including Belair-Edison and Waverly.

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